# Case Study: Hong Kong (1945–1997) Back to [[Economic Freedom and Prosperity]] · [[Post Analysis - Handre on Economic Freedom Case Studies (2026-10-23)|Post analysis]] · People: [[People/John Cowperthwaite]], [[People/Philip Haddon-Cave]], [[People/Milton Friedman]] **What the post says:** a flat tax below 15% from 1960 to 1997, minimal licensing and near-zero tariffs turned "a fishing village" into one of the richest places on earth, driven by Cowperthwaite's restraint. ## What the record shows | Item | Finding | Source | |---|---|---| | Income in 1960 vs 1997 | GDP per capita was 37% of the UK's in 1960, 56% in 1971 and 114% in 1997 (2011 int'l $) | ✔ [Maddison Project 2023 via OWID](https://ourworldindata.org/grapher/gdp-per-capita-maddison-project-database) | | "Fishing village" | A myth for 1960. Hong Kong was then a populous entrepôt with fast-growing textile and light manufacturing, much of it started by Shanghai industrialists after 1949 | ◻ | | Tax structure | Not a flat tax. Salaries tax used progressive bands, with total tax capped at a standard rate on gross income. Standard and profits-tax rates were raised to 15% in 1966, and profits tax to 16.5% in 1975 | ✔ [Littlewood (HKU Press preview)](https://hkupress.hku.hk/image/catalog/pdf-preview/9789622090996.pdf) | | Rates in the 1980s | Standard rate went from 15% (1975–84) to 17%, then back to 15% by about 1989. Corporate rate went from 16.5% to 18.5%, then back to 16.5%. Tax revenue was about 9–12% of GDP | ✔ [NBER c8512](https://www.nber.org/system/files/chapters/c8512/c8512.pdf) | | Tariffs | Free port. Duties applied only to a few goods (tobacco, alcohol, hydrocarbons and similar), about 1–2% of GDP | ✔ NBER c8512 | | GDP statistics | Cowperthwaite resisted national accounts: "a proper subject for academic rather than official research" (Mar 25, 1970). He allowed one extra statistician in 1971 | ✔ [HKMA 2006](https://www.hkma.gov.hk/eng/news-and-media/insight/2006/02/20060202/) | | | Official GDP estimates were first published in 1973, with the series starting in 1961 | ✔ [C&SD 1973 booklet](https://www.censtatd.gov.hk/en/data/stat_report/product/B1030002/att/B10300021973AN73E0100.pdf); [Goodstadt/HKIMR](https://www.aof.org.hk/uploads/publication/210/ub_full_0_2_128_wp200606_text.pdf) | | Why he resisted | Friedman's account: "they'll want to use them for planning." Goodstadt adds political convenience and keeping budget autonomy from London. Cowperthwaite also made exceptions (infant industries, building licences) | ✔ Goodstadt/HKIMR; Friedman, *Two Lucky People* (1998) p. 318 ◻ | | Land | The Crown owned all land and leased it. Land-value capture funded much of the infrastructure: in 1970–91 about 39% of land-value gains were captured, paying for about 55% of annual infrastructure investment | ✔ [Hong & Lam, Lincoln Institute 1998](https://www.lincolninst.edu/app/uploads/2024/04/65_honglam98_1.pdf) (via search summary) | | Public housing | After the 1953 Shek Kip Mei fire left more than 50,000 homeless, resettlement blocks went up from 1954. Public rental or subsidised-sale housing eventually held about half the population | ✔ [HK Housing Authority timeline](https://www.housingauthority.gov.hk/en/common/pdf/about-us/public-housing-heritage/public-housing-development/Timeline(W3C)_EN.pdf) (via search summary) | | After Cowperthwaite | Haddon-Cave (FS 1971–81) called the policy "positive non-interventionism" | ◻ | | Scholarship | A 2026 *Public Choice* article examines Cowperthwaite's policy | ⚠️ [Springer](https://link.springer.com/article/10.1007/s11127-026-01404-7): found in search, contents not summarised here | ## Reading Hong Kong is the strongest case in the post. A low, simple and stable tax regime, free trade and a small state did go with very fast growth. The post's version still has three problems. The tax wasn't flat or always under 15%. The starting point was not a fishing village. And it leaves out the state's large role as landlord and housing provider, as well as unusual luck: refugee capital in the 1950s and China's opening after 1978.